HERCULES -- Residents proposed a variety of functions for the Civic Arts building and its struggling restaurant at a recent community meeting, even though it is unclear which agency owns the building and how much discretion the city has over its fate.

At Thursday's meeting in the City Council chamber, about two dozen residents, many from the Hercules Historic Homes and the surrounding waterfront neighborhoods, suggested two basic alternatives: leasing the building to another restaurateur, or putting it to a range of possible civic uses, such as a total-immersion language school, a culinary academy or an events center.

Several proposed combinations of the two basic approaches, including using the building for a cafe, bakery and restaurant at different times during the day as well as a venue for homeowners association meetings, weddings and other special functions. Several cautioned that the city currently has no money to operate the building.

The City Council likely will take up the issue of what to do with the building in the new year.

The original 2008 lease agreement between Sala and the redevelopment agency calls for a starting rent of $3,465 a month for the 2,100-square-foot building. The restaurant is considerably in arrears on the rent, officials say.

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In June 2009, the City Council passed two resolutions approving a transfer of ownership of the building from the now-defunct Hercules redevelopment agency to the city. The transfer appears at first glance not to have been recorded, said City Manager Steve Duran, who is researching the matter further. A January 2010 lease amendment that includes a $230,000 loan to Sala for tenant improvements names the city as landlord but includes the redevelopment agency, which funded the loan, as a party to the amendment.

Under rules accompanying the state's abolition of redevelopment agencies earlier this year, agency properties generally must be sold to pay off agency obligations but in some cases could be transferred to the city for civic uses, subject to state approval. Those rules, however, would not apply to the Civic Arts building if it turns out the city owns it by virtue of the 2009 resolutions.

Built around 1917, according to a plaque near the entrance, the Civic Arts building has served as workers' quarters, the Civic Arts Center, a senior center and a Tiny Tots preschool before it closed. The redevelopment agency invested more than $1.6 million to acquire and rehabilitate the building.

The 2008 lease agreement came as a surprise to many residents of the adjacent Historic Homes who thought the building was supposed to become a historical museum. Many opposed a restaurant, fearing that noise, smells, lights and traffic would spoil the quiet of their neighborhood.

In July 2008, the Planning Commission, heeding the neighbors' concerns and denied Sala a conditional use permit for a restaurant. But two weeks later, the City Council adopted the Waterfront Now Initiative, which added a loop to the Waterfront District boundary to incorporate the Civic Arts Building and put it under the "Historic Town Center" zoning, where a restaurant does not require Planning Commission approval.

Many residents eventually made their peace with the restaurant, and some expressed dismay Thursday at its apparent failure and offered varied explanations. Some suggested the mostly Thai fare was too specialized to appeal to a broad base. Others blamed the restaurant's off-the-beaten-track location and a lack of signage to draw attention to it; still others blamed the as-yet unrealized dreams of a bustling surrounding waterfront area that could support Sala as part of a greater cluster of restaurants and other businesses.